Underdog sues Missouri over prediction-market enforcement

Underdog Exchange DCM Inc. has sued Missouri Attorney General Catherine Hanaway in federal court, seeking to stop the state from applying its gambling laws to the company’s prediction-market business.

The case, filed Nov. 8 in the U.S. District Court for the Western District of Missouri, is Underdog Exchange DCM, Inc. v. Hanaway, No. 2:26-cv-04300. It was assigned to Judge Mary Elizabeth Phillips, and the docket records three pro hac vice motions filed that day.

Underdog is seeking a preliminary injunction barring Missouri officials from enforcing what it calls pre-empted state gambling statutes against its federally regulated derivatives markets. Its position is that sports-event contracts are swaps subject to federal oversight by the Commodity Futures Trading Commission, an argument the court has not yet decided.

On Nov. 9, the CFTC said it held exclusive jurisdiction over US commodity-derivatives markets, including event-contract markets commonly called prediction markets, and that states lacked authority to further regulate markets within that jurisdiction.

Missouri takes the opposing view. Hanaway’s office announced cease-and-desist letters on Sept. 18 to Underdog, Polymarket, Kalshi, Crypto.com, Novig and Robinhood, contending that their sports event contracts amounted to unlicensed sports wagering. The companies were told to stop serving Missourians unless they obtained Missouri Gaming Commission licences, with enforcement threatened for noncompliance.

Hanaway said companies could not “repackage sports bets as ‘event contracts’ to avoid Missouri law.” Her office has maintained that federal law does not pre-empt the state’s rules and that the contracts do not qualify as swaps under the Commodity Exchange Act.

Missouri voters approved Amendment 2 in 2024, creating a regulated sports-betting framework overseen by the Gaming Commission. The market opened Dec. 1, 2025, permitting licensed mobile, online and in-person wagering, imposing a 10% tax on gross receipts and requiring measures to prevent people under 21 from betting.

The filing makes Underdog the fourth prediction-market operator to challenge Missouri’s campaign, after lawsuits by Crypto.com’s exchange and Novig on Oct. 16 and Kalshi on Oct. 27. Underdog had also filed its five-state federal challenge to prediction-market enforcement on Sept. 8, as we reported.

Underdog launched its prediction-market product in July, initially in 38 states before expanding to 46. It was unavailable in Arizona, Michigan, Nevada and New York. The company also withdrew a planned Missouri sportsbook licence application pursued with the Kansas City Royals, choosing instead to focus on prediction markets.

The Missouri case arrived amid a wider dispute over the boundary between state sports-betting regulation and federal commodities oversight. A CFTC proposal published in June would define “gaming” and clarify the circumstances in which event contracts involve an underlying activity; it noted that CFTC-registered prediction markets handled more than $25 billion in trading volume in 2025.